3PLs, or third-party logistics companies are becoming pivotal for retailers trying to achieve online and omnichannel strategies. It’s probably why you keep running into the word. They’re essential to the growing need of better online order fulfillment.
But, what is a 3PL? What role can they play in your business?
This article helps answer these questions and more.
What is a 3PL?
As stated above, 3PL is short for third-party logistics. Other terms you might hear are pick and pack and fulfillment companies.
In short, a 3PL is a third-party company that takes care of your supply chain processes. These processes can include warehouse management, transportation of goods, reporting and forecasting, etc.
There are many different types of 3PLs that serve different needs. Some 3PLs specialize by industry or just a certain area of logistics.
No matter what aspect they specialize in, a 3PL helps to efficiently manage your supply chain.
How 3PLs Are Changing the Retail Landscape
Now that you know what a 3PL is, you can better understand the role that 3PLs play in changing the retail landscape.
In December 2015, consumers reported that the most important thing to them is free shipping, 72% listed this as their number one priority.
Not only do they not want to pay for shipping, but they also expect it to be fast. Amazon has responded to these demands by offering 1 to 2 hour shipping in some major cities.
Scrambling to meet customer demands, retailers are turning to third-party logistic companies to manage all or parts of their supply chain processes. They know that supply chain management is the foundation of customer experience.
How you handle and ship online orders from multiple sales channels requires a sound supply chain strategy. You have to manage inventory, pick inventory, and then quickly and accurately ship it to your customers.
Imagine how complicated this process gets when fulfilling from the same inventory for your Amazon, eBay, in-store back orders, and your site for hundreds and thousands of orders. Also, how do you make the return process easy for your customers?
Perfecting this process is crucial for retailer striving for an optimized omnichannel experience for their customers. You can’t let slow, unreliable shipping processes stop your customers from purchasing your products where they want.
Having strong supply chain management is now a competitive advantage for retailers. It allows you to compete with the likes of Amazon (if you can afford to offer free, 2-day shipping and can guarantee delivery every time). And for most retailers, you can’t.
For those retailers, you can bet that they are losing sales to their competitors that can.
But, managing the supply chain by yourself is costly and difficult. You have to invest in locations, staff, and the necessary technology. It’s a large undertaking, especially if you consider Amazon as the golden standard for fulfillment experience.
That’s why many retailers are instead turning to 3PLs to help manage the supply chain.
Benefits of 3PLs for Retailers
Most retailers, unless you’re Amazon, do not specialize in supply chain management or are logistic experts. It’s not what you’re in business for. This leads many retailers to outsource their supply chain management to a 3PL.
3PLs often specialize in a certain area of supply chain management. Instead of incurring the cost to specialize in that area yourself, retailers can outsource for better logistic efficiency and cost-effectiveness.
For example, 3PLs can leverage relationships and volume discounts that retailers could not otherwise achieve alone.
Along those lines, 3PLs also save retailers from investment in warehouses, staff, technology, and transportation. Retailers can opt out of this responsibility and instead focus on core operations and customer experience.
In turn, this helps make retailers more flexible. Building upon the expertise and resources of the 3PLs, retailers can expand without taking on the extra work themselves. You won’t have to build more warehouses and invest in needed technology.
Retailers are one of the groups seeing 3PLs as a smart way to streamline their supply chain processes.
During the past year, 94% of 3PLs have increased sales at least 5% during the past year. This compares to 73% of 3PLs just five years ago.
More retailers are looking to 3PLs for many different reasons, most importantly for improving their bottom line, better serving their customer, and more adeptly competing in the evolving retail industry.
3PLs can help your business in the same way.
How to Find 3PLs
There are all sorts of 3PLs, or fulfillment services available to you. It can be overwhelming to research to find the best one for your business.
To help retailers like you, we’ve put together a few different articles to guide your research. Click the links below to start your search. (Keep in mind that 3PLs, pick and pack, and eFulfillment are all terms that can be used interchangeably)